If approved by the country's parliament, the proposed budget will be the country's fifth annual increase in military spending, according to media sources.
The latest budget request amounts to a 2.3% increase over the past year.
Of the total requested amount, JPY105.6bn ($1bn) will be used to upgrade PAC-3 surface-to-air missile systems in order to strengthen the country's missile defence capability, as reported by The Associated Press.
Nearly JPY14.7bn ($140m) will be invested in new missile interceptors and modernisation of the destroyers that would carry these interceptors.
The next-generation missile interceptors will be developed in collaboration between Japan and the US, according to the news agency.
Additionally, JPY76bn ($735m) will be spent on the development of a new submarine with advanced surveillance capabilities to tackle Chinese activity in the East China Sea.
Another JPY74.6bn ($720m) will used to station guard units on the southern islands of Miyakojima and Amami Oshima.
Approximately 1,300 soldiers from the Japan's Self-Defense Force will be deployed to the southern islands of Kagoshima and Okinawa, The New York Times reported.
Japan is also exploring an amphibious unit on the southern main island of Kyushu.
It also plans to develop a long-range ship-to-air missile and acquire F-35 fighter jets.